Objective

In this Session you will be able to understand :

 The concept of Self-help groups (SHG’s), a vehicle through which the

concept of micro-finance is carried to the unreached and under
reached sections of the rural poor.
Introduction

 Self-help group is a voluntary association of poor formed with the

common goal of social and economic empowerment.

 Self-help group is a silent revolutionary concept that is taking place in

the credit delivery system.

 The members volunteered to organize themselves into a group for the

eradication of poverty of the members.

 They agree to save regularly and convert their savings into a common
fund known as the group corpus.
Need for SHGs

 To mobilize the resources of the individual members for their collective

economic development.
 To uplift the living conditions of the poor.
 To create a habit of savings.
 Utilization of local resources.
 To mobilize individual skill for group’s interest.
 To create awareness about rights.
 To assist the members financially at the time of need.
 Entrepreneurship development.
 To identify problems, analyzing and finding solutions in the group.
 To act as a media for socio-economic development of the village.
Contd……………….

 To develop linkages with institutions of NGOs.

 To organize training for skill development.

 To help in the recovery of loans.

 To gain mutual understanding, develop trust and self confidence.

 To build-up teamwork.

 To develop leadership qualities.

Contd………………..

Group formation will keep in view the following broad guidelines:

 The number of members in a group should not exceed twenty;
otherwise ,registration becomes compulsory, generally a SHG may be
consist of Ten to twenty persons.
 However in the areas like deserts, hills and areas with scattered and
sparse population and in case of economically weaker and /or
physically disabled persons, this number may be from five to twenty.
 Generally ,all members of the group should belong to families below
poverty line.
 If necessary ,a maximum of twenty percent and in exceptional cases
where essentially required up to a maximum of thirty percent of the
members in a group may be taken from families marginally above the
poverty line living contiguously with BPL (Below poverty line) families
and if they are acceptable to BPL members of the group.
Contd………….

 However ,the APL members will not be eligible for the subsidy under
the scheme.
 The group shall not consist of more than one member from the same
family
 A person should not be a member of more than one group. The group
devise a code of conduct to bind itself.
 The group corpus fund should be used to advance loans to the
members. The group should be able to prioritize the loan applications,
fix repayment schedules, fix an appropriate rate of interest for the
loans advanced and closely monitor the repayment of the loan
installments from the loanee.
 The group should operate a group account preferably in their service
area bank branch, to deposit the balance amounts left with the groups
after disbursing loans to its members.
Functions of SHGs

Guidelines for the formulation of rules & regulation which SHGs should adopt
are:
 Meeting: group should meet regularly ,ideally meeting should be weekly or at least
monthly.
 Compulsory Attendance: Full attendance in al the group meetings will make it easy
for the SHG to stabilize and start working to the satisfaction of all. Membership
register , minutes register etc. are to be kept up to date by the group, by making the
entries regularly.
 Fixed day for meetings: The group should fixed day or date for the meetings.
 Common Place: The group should fix a common place to conduct the meetings.
 Savings: Savings should be deposited by all the members in the meeting itself .No
interest will be paid to the members for their money with the group. The members will
not be encouraged to adjust their savings amount against their loan due to the group.
Contd…………….

 Keeping of accounts: Simple and clear books for all transactions, to be

maintained. All registers and account books are written during the course of the
meeting. If no member is able to maintain the books, the SHG may take outside
help.
 Resolution from the SHG: The SHG has to pass a resolution in the group
meeting, signed by all members, indicating their decision to open SB A/c with the
bank. this resolution is filed by the bank.
 Authorization from the SHG: The SHG should authorize at least three
members, any two of whom, to jointly operate upon their account.
 Copy of the rules and regulations of the SHG: This is not necessary. If the
group is not formulated any such rules or regulations, loans are sanctioned
without them. A saving bank account passbook is issued to the SHG.
 Conduct of internal lending by SHG: After saving for a minimum period of two
to three months, the common savings fund should be used by the SHG for
lending to its own members. Interest is usually kept as two or three rupees per
hundred rupees per month.
Other conditions of Indirect Finance to SHGs
through NGOs

 NGO is registered under the social/company/partnership /cooperative act.

 Audited balance sheet for three years analyzed.

 Provision in the by laws of NGO to borrow for SHG activities.

 Resolution to borrow from Bank.

 A statement of credit required by SHGs.

Contd…………..

Self-Help groups (SHGs) are considered for assistance under PMR provided:
 Educated unemployed youth satisfying the eligibility criteria as laid down
under the scheme, volunteer to form SHG to set up self-employed
ventures (Common Economic Activity).
 A self help group may consist of 5 to 20 educated unemployed youth.
 No upper ceiling on Loan.
 Loans provided as per individual eligibility, taking into account the
requirement of the project.
 SHG my undertake a common economic activity for which a loan is
sanctioned without resorting to onward lending to its members.
 Subsidy is provided to the SHG as per the eligibility of the individual
members, taking into account the relaxation provided in north Eastern
states, uttarakhand, Himachal Pradesh and Jammu & Kashmir.
Contd……………

 Required margin money contribution should be brought in by the SHG

collectively.

 The exemption limit for obtaining collateral security will be Rs. 5 Lakh per
borrowing account for projects under the industry sector. Exemption from
collateral will be limited to an amount of Rs. 1 Lakh per member of SHG
for projects under service and business sectors.

 Implementing agencies may decide the necessity of pre-disbursal training

for all the members/majority in the group.
Self Help Groups and SGSY Scheme

 The SGYS scheme has come into operation from 1 April 19999
replacing al other schemes like IRDP, TRYSEM, DWCRA, SITRA, GKJ,
MWS etc. The objective of the scheme is to bring the poor people above
poverty line within three years.

 The scheme envisages supplementary doses of credit if necessary to

the participants. Preference will be given to well functioning SHGs in the
village both under the group finance and individual finance.
Capacity Building of the Self- Help Groups

 SHGs that are inexistence for about six months and have demonstrated
the potential of a viable group enters the stage . Where in it receives the
revolving fund of Rs. 25,000 from the bank as a cash credit facility and
also embarks on further capacity building of its entire team.

 DRDAs will arrange to provide the revolving fund to such groups,

meeting their share from out of the SGSY fund. Of this sum of Rs.
10,000 is given to the bank by the DRDA. Bank may charge interest only
on the sum exceeding Rs. 10,000.
Summary

 In this session you have learnt:

 SHG is an unregistered group of less than twenty people, otherwise registration is
compulsory from a homogenous class who come together for addressing their
common problems, both economic and community problems.
 The concept is well received in the developing and the under developed countries
as evidence by the recognition the father of the SHG movement ,Mr.
Mohammed Yunus of Bangladesh received a noble Award.
 Salient Features of SHG Movement are :
a) Groups of Homogenous people from Similar economic background living in the
neighborhood.
b) Focus on women.
c) Saving first, Credit Later.
d) Credit prioritized among the members, which builds pressure for timely
repayment.
e) Transparent operation ,as decisions are taken collectively in meetings.